1

High Level Group on Administrative Burdens

Case Study on ABRplus Item No. 2

"Allowing more SMEs to benefit from simplified accounting/auditing regimes"

Under the Action Programme for Reducing Administrative Burdens in the EU, measures with an

estimated administrative burden reduction potential of EUR 33.4 billion in annual savings for

businesses at EU level have been adopted with the support of the High Level Group on

Administrative Burdens (HLG) to date (July 2014). Since benefits will not materialise until the

measures are successfully implemented in Member States, the European Commission has tasked the

HLG to assist and advise on the follow-up of the Action Programme ("ABRplus") by comparing

Member State implementation and achieved results with initial estimates and to identify best

practices of implementation.

Summary

Area Annual Accounts/Company Law

Covered

legislation

Directive 2006/46/EC of 14 June 2006, in force since 5 September 2006, to be

transposed by 5 September 2008

Main features The Accounting Directives allow Member States to foresee exemptions from the

accounting and auditing regime for small and medium-sized companies (SMEs).

SMEs are defined as falling below certain threshold limits of their balance sheet

total, net turnover and/or average number of employees during the financial

year. However, there is no obligation on Member States to make use of those

exemptions for SMEs. Directive 2006/46/EC of 14 June 2006 increased the

exemption thresholds by around 20% of their pre-existing value but continued

to leave the use of the SME exemptions and the resulting simplifications in the

discretion of Member States.

HLG involvement Opinion on the priority area of company law/annual accounts of 10 July 2008

Estimated annual

savings

Potential at EU level: EUR 862.6 million

Realised in Member States: See table on p. 4.

Identified best

Practices

Raising of exemption thresholds to the maximum levels permitted by the

Directives;

Extensive stakeholder involvement in implementation;

Electronic system for submitting compulsory accounting, fiscal and

statistical declarations, single point of contact.

HLG

recommendations

To Member

States:

Implement Directive 2013/34/EC into national law as fully

and quickly as possible;

Involve stakeholders as much as possible in national

implementation via consultation and impact assessments

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and verify actual results after implementation;

Step up efforts to apply the only-once-principle to the

widest extent possible and to facilitate e-government

solutions;

Implement and apply the revision of the auditing rules so

that time and money can be saved.

To the

Commission:

Examine the practical and/or political hurdles that have

discouraged Member States from implementing the optional

simplification regime and continue to consult stakeholders

in order to identify concerns;

Further examine the different XBRL practices in Member

States and to work towards streamlining taxonomies;

Update the accounting rules and rules that define the

storing of documents in other EU countries for a consistent

approach,

Assess the complexity of the current obligation of

authentication, identify ways to soften it and to streamline

this obligations with the accounting legislation.

To both the

Commission

and

Member

States:

Come to an agreement on the thresholds in Directive

2013/34/EU to ensure one interpretation of the Directive;

Foster the use of existing information sources and to

promote the development of IT tools for more efficient

extraction, transmission and treatment of data;

Step up implementation of the only-once-principle to the

widest extent possible, to facilitate e-government solutions

and promote further burden reduction.

Description of the reduction measure

Directive 78/660/EEC allows Member States to foresee exemptions from the accounting and auditing

regime (e.g. drawing up an abridged balance sheet showing only a limited number of items or not

having their annual accounts audited by a professional auditor) for small and medium-sized

companies (SMEs). The Directive defines SMEs as falling below certain threshold limits of their

balance sheet total, net turnover and/or average number of employees during the financial year.

There is no obligation on Member States to make use of those exemptions.

The thresholds have been raised numerous times since 1978, thus permitting Member States to at

least keep up with inflation and also exempt more companies from burdensome accounting and

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auditing rules. In the context of the Action Plan for Modernising Company Law and Corporate

Governance1 at EU level, the European Commission proposed on 27 October 2004 to amend the

Accounting Directives 78/660/EEC and 83/349/EEC2 in order to further enhance confidence in the

financial statements and annual reports published by European companies by, inter alia, establishing

collective responsibility of board members for drawing up and publishing financial statements and

introducing a corporate governance statement3. The original Commission proposal did not contain

any suggestions for an increase of the SME thresholds. On initiative of the European Parliament, a

new article was inserted into the proposal which increased the exemption thresholds by around 20%

of their pre-existing value, to account for inflation, but continued to leave the use of the SME

exemptions in the discretion of Member States. The amended proposal including the threshold

increase was adopted as Directive 2006/46/EC and published in the Official Journal on 16 August

2006; Member States were required to transpose it into national law by 5 September 2008. All

thresholds and the resulting simplifications are optional for Member States to transpose. According

to measurements made under the Action Programme for Reducing Administrative Burdens in the EU

of 2007, around 340,000 SMEs could benefit from less burdensome accounting and auditing regimes,

thus reducing administrative burdens by EUR 862.6 million (- 8%)4.

Recent regulatory developments5

Following a resolution by the European Parliament of 18 December 20086 which stated that the

Accounting Directives are often very burdensome for SMEs, particularly micro-entities, the

Commission proposed on 25 October 2011 to amend Directive 2006/43/EC and to repeal the two

Accounting Directives 78/660/EEC and 83/349/EEC7. The proposal was finalized as Directive

2013/34/EU of 26 June 2013 with a deadline for implementation until 20 July 2015, for application to

the financial statements for the year 2016. Together with a general review and further simplification

of the accounting requirements, the new Directive raises the threshold values for the definition of

SMEs and makes the application of certain simplifications mandatory for all Member States, thus

creating a harmonized playing field across the EU. However, micro-entities remain subject to any

national obligation to keep records showing their business transactions and financial position. The

exemption of micro and small entities from a general publication requirement remains optional.

1 COM(2003)284

2 Directive 78/660/EEC on the annual accounts of certain types of companies, Directive 83/349/EEC on consolidated

accounts 3 COM(2004) 725 of 27 October 2004

4 COM(2009) 544 Final Annex Action Programme for Reducing Administrative Burdens in the EU, Sectoral Reduction Plans

and 2009 Actions. 5 Cf. also the Commissions website on the simplification of accounting for SMEs:

http://ec.europa.eu/internal_market/accounting/sme_accounting/index_en.htm 6 Resolution on accounting requirements as regards small and medium-sized companies, particularly micro-entities of 18

December 2008, http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=EN&procnum=RSP/2008/2687 7 COM(2011)0648

http://ec.europa.eu/internal_market/accounting/sme_accounting/index_en.htmhttp://ec.europa.eu/internal_market/accounting/sme_accounting/index_en.htmhttp://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=EN&procnum=RSP/2008/2687

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Overview on thresholds for company sizes in the accounting directives (in million EUR)

Directive Micro company up to 10 employees

Small company up to 50 employees

Medium-sized company up to 250 employees

Balance sheet

Net turnover

Balance sheet

Net turnover

Balance sheet

Net turnover

1978/660/EC - - 1 2 4 8

1984/569/EEC - - 1.55 3.2 6.2 12.8

1990/604/EEC - - 2 4 8 16

1994/8/EC - - 2.5 5 10 20

1999/60/EC - - 3.125 6.25 12.5 25

2003/38/EC - - 3.65 7.3 14.6 29.2

2006/46/EC - - 4.4 8.8 17.5 35

2012/6/EU 0.35 0.7 4.4 8.8 17.5 35

2013/34/EU 0.35 0.7 4 / 68 8 / 129 20 40

Involvement of the HLG

In its Opinion of 10 July 2008 on the priority area of company law10, the HLG called upon the

Commission to

check all rules applying to small and medium-sized enterprises on whether they comply with

the needs of smaller enterprises and whether they respect the think small first-principle;

inquire further into why the options to exempt SMEs from the accounting and auditing

regimes have not been used by all Member States and to assess the related savings potential;

undertake a general overhaul of the company law aquis, in particular with a view of adapting

the company law aquis to the needs of SMEs, thereby examining possible synergies with

other areas with a view to implementing the only once-principle and to enable companies

to develop the most efficient and least burdensome solution to comply with legislation in

other areas such as tax or statistics.

The HLG has included examples concerning the area of company law in its Best Practice Report

201111.

In the HLG meeting on 23 July 2013, the Commission presented its follow-up to the HLGs opinion of

10 July 2008 as follows:

8 Member State option

9 Member State option

10 http://ec.europa.eu/smart-regulation/refit/admin_burden/docs/enterprise/files/080710_hlg_op_comp_law_final_en.pdf

11 http://ec.europa.eu/dgs/secretariat_general/admin_burden/best_practice_report/best_practice_report_en.htm

http://ec.europa.eu/smart-regulation/refit/admin_burden/docs/enterprise/files/080710_hlg_op_comp_law_final_en.pdfhttp://ec.europa.eu/dgs/secretariat_general/admin_burden/best_practice_report/best_practice_report_en.htm

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HLG Suggestion Consult. Proposed Adopted

General overhaul of the Directive / adapt to the needs of SMEs

Promote use of current options to exempt certain types of companies from specific provisions of the 4th and 7th Directives

Exempt small companies from the obligation to publish their annual accounts

Partial

No audit or lighter audit

More flexibility concerning the thresholds for small and medium sized enterprises while safeguarding legal certainty and predictability

Apply small regime to medium-sized companies which are fully owned by their managers

Simplification of the layout of the income statement for all companies in relation to extraordinary income and extraordinary charges

Simplification of the disclosure requirements for small companies

Apply small regime to all single-member private limited liability companies (as defined in the Twelfth Directive).

Implementation in Member States

According to the Commission's September 2011 Report on the responses received to the

consultation of Accounting Regulatory Committee Members on the use of options within the

accounting directives12, all Member States have transposed Directive 2006/46/EC, 16 Member States

transposed late. Concerning the optional increase of the thresholds provided for in Directive

2006/46/EC, 17 Member States reported that they had increased the thresholds between 2006 and

2011. One Member State did not introduce the small company type, nine Member States had very

low thresholds for small companies, ten were above average and seven used the maximum threshold

foreseen. More than half of the Member States did not introduce the medium-sized company type.

No Member States described whether they had sought to involve stakeholders in implementing the

measure. Clear obstacles or difficulties in implementation were cited by Denmark and the UK, and

only Spain described national measures that might be considered to go further than the measures

agreed at European level provide for.

12

http://ec.europa.eu/internal_market/accounting/docs/2010-options_en.pdf

http://ec.europa.eu/internal_market/accounting/docs/2010-options_en.pdf

6

Realized annual savings potential per Member State

Member State Value

AT

DE

DK

IE

LV

SI

UK

EUR 20 million

EUR 300 million

EUR 8 million (confirmed by survey in 2010)

EUR 3 million

EUR 16.8 million (over a 7 year period)

EUR 126,000

EUR 46.13 million (GBP 36.73 million)

BG, BE, CY, CZ,

EE, ES, FR, EL,

HR, LT, LU, MT,

NL, PL, PT, RO,

SE

no quantification possible

FI, HU, IT, SK no implementation into national law (yet)

Stakeholder feedback on implementation

The Confederation of Danish Industry (DI) notes that unfortunately the Directive does not explicitly

allow for the direct application of IFRS (International accounting standards) for SMEs. This standard is

recognized internationally and can easily be integrated across Member States and would thus be

beneficial for SMEs to use on a voluntary basis. Companies need to understand the accounting

regime in the other Member State when entering into cross border activities or setting up activities

in other member states. Thus, the lack of harmonisation is a hindrance and is not in accordance with

the intentions of the internal market. Although the newly adopted Directive resolves the issue partly

for small entities as it prohibits increased reporting requirements invoked by the Member States

concerning small entities, medium-sized companies will still be facing a patchwork of accounting

regulations in the member states. Medium-sized companies need to be able to use the same

accounting regulation through-out Europe and the regulation needs to have global outreach and

recognition. DI suggests that the IFRS for SMEs be introduced on a voluntary basis to the extent that

it can be in line with the directive. This would allow the companies to use an internationally accepted

set of accounting standards for their European operations as well as for the bulk of their

international activities. Thus, we would have the flexibility for the medium sized companies to use

the internationally accepted framework, if this is considered beneficial compared to the costs

incurred, while the member states on the other side could still set the national GAAP at the level they

deem appropriate for their national medium-sized entities. It is DIs understanding that the few

differences in recognition and measurement criteria between the old accounting directives and the

SME standard have been resolved with the newly adopted directive. Thus, the real difference is in

the level of disclosures. This also clearly highlights, why a voluntary basis is important. Allowing the

use of IFRS for SMEs would give companies the possibility of streamlining their accounting practices

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not only in Europe, but globally. It would also reduce costs when trying to attract international

financing. Companies operating within Europe and using local finance would not be burdened as they

could still use their local GAAP.

Ireland proposes to amend legislation to allow companies to avail of the audit exemption when two

out of three criteria (thresholds on the number of employees/balance sheet total/annual

turnover) are met rather than requiring companies to meet all three criteria as is the current

position.

Germany argues that SMEs often use the options to simplify accounting, as significant savings can be

achieved. Companies covered by increased thresholds only have also made use of these options. In

particular, the options for small companies not to engage a statutory auditor and not to prepare a

management report should be named here. Adaption of thresholds is a reflection of economic

developments and can adjust effects of a cold inflation. In the course of further discussion, the new

Directive 2013/34/EU has been passed granting an option to increase thresholds for small and

medium-sized undertakings again. The matter of thresholds should, therefore, be reassessed by the

Commission after implementation of this Directive.

Identified best practices of implementation

From the analysis of Member State implementation, the HLG would like to point out the following

best practice examples:

Germany, Ireland, UK: Raising of exemption thresholds to the maximum levels permitted by

the Directives;

Denmark, UK: Extensive stakeholder involvement in implementation;

Denmark: Stakeholder survey to verify actual administrative burden reduction after

implementation;

Portugal: The Informao Empresarial Simplificada (Simplified Corporate Information) system

was established to enable companies to submit compulsory accounting, fiscal and statistical

declarations electronically13 in a single process and at once with a single public entity in

charge of forwarding the data to the other, avoiding trips and eliminating the delivery of

paper documents. It combines, in a single act, the delivery of the annual accounting and tax

information, the provision of accounts registry, the provision of statistical information14 and

provision of annual accounting data for statistical purposes, to the Bank of Portugal and is

conducted by online standard forms through the Portal of Finance15. Through the Portal of

the Company16, entities can track the status of the Register of Accountability. This measure

13

www.ies.gov.pt 14

www.estatisticasempresariais.mj.pt 15

www.portaldasfinancas.gov.pt 16

www.portaldaempresa.pt

http://www.ies.gov.pt/http://www.portaldasfinancas.gov.pt/

8

offers greater simplicity for companies at lower cost, enhances transparency of the market

and thus and competitiveness amongst companies.

HLG recommendations

An SME-friendly business environment, both at Community level and in the Member States, is crucial

for growth and jobs in Europe. In some key industries, SMEs account for more than 70% of all jobs.

Appropriate accounting information is important for successful management of a business whether it

is large or small. The preparation of financial statements has been identified as one of the most

burdensome regulatory obligations for companies, especially SMEs. Small companies face

proportionally higher administrative burdens in comparison to medium-sized / large companies.

Thus, all measures have to be taken that can help businesses, especially SMEs, to avoid unnecessary

costs in complying with regulatory requirements.

The Commission has acknowledged that the HLG has made an important contribution to the debate

on the revision of the Accounting Directive; most of the suggestions of the HLG have been taken into

account into the reform. Analysis of Member State implementation has shown that many Member

States have, for sometimes not clearly stated reasons, decided not to make use of the possibilities

granted by Directive 2006/46/EC to relieve SMEs of unnecessary administrative burden by raising the

exemption thresholds to the full potential. In view of the immense reduction potential offered by

applying the exemption from the accounting and auditing regime to the largest permissible number

of enterprises, the HLG welcomes the initial shift away from an optional regime towards the

mandatory determination of exemption thresholds with the new Directive 2013/34/EC. However, the

thresholds will have to be adapted regularly also in the future in order to compensate for inflation

and to bring significant real savings for stakeholders.

The HLG thus puts forward the following recommendations:

To Member States:

The HLG urges Member States to

implement the new Directive 2013/34/EC into national law to the fullest extent and as

quickly as possible in order to maximise administrative burden reduction for SME;

involve stakeholders as much as possible in the process of national implementation via

consultation and impact assessments, following the example of Denmark and UK;

verify actual results after implementation, following the example of Denmark;

step up efforts to apply the only-once-principle to the widest extent possible and to facilitate

e-government solutions in the supplying of financial information to different or the same

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authorities for different or the same purposes (e.g. taxation, statistics), following the

example of Portugal;

implement and apply the revision of the auditing rules so that time and money can be saved:

If companies decide not to make use of an auditor, tax authorities are likely to take on the

audit of submitted accounts. This may lead to more burdensome exchanges between tax

authorities and companies. Therefore, many very small companies may continue with

auditing on a voluntary basis, as this may be the most efficient practice and can give them

the possibility to negotiate a better price with the auditing company.

To the Commission:

The HLG urges the Commission

to examine the practical and/or political hurdles that have discouraged Member States from

implementing the optional simplification regime in order to overcome these issues in the

future when the thresholds have to be adapted. To that extent, the Commission should

continue to consult businesses and other stakeholders in order to identify such obstacles and

concerns;

to further examine the different XBRL practices in Member States and to work towards

streamlining taxonomies as far as possible.

to look at how the accounting rules can be brought in line with the 21st century. This

particularly concerns the rules that define the storing of documents in other EU countries,

which no Member States currently fully accepts. Given that the VAT Directives are adapted

to accept storage of documents in other Member States, the accounting rules need to be up-

dated for a consistent approach,

to use the evaluation of the VAT-Directive 2010/45/EU of 13 July 2010 in 2016/17 inter alia

to assess the complexity of the current obligation of authentication and to identify ways to

soften the obligation, preferably deleting it and to streamline this obligations with the

accounting legislation. Reactions from stakeholders make clear that the current article 247

on the storage of invoices leads to difficulties. Stakeholders have difficulty in understanding

the obligations in the different Member States. This is enhanced due to the possibility for

Member States to demand data guaranteeing and authentication. The differences between

the Member States also lead to lack of acceptance of the different storage methods and

increase the burdens due to different requirements of e-signatures and lack of

interoperability. During Council discussions on the proposal, the Council increased the

obligations for both (authenticity of e-invoicing and storage) considerably;

10

To both the Commission and Member States:

Come to an agreement on the status of the thresholds in Directive 2013/34/EU (absolute or

upper limits) to ensure one interpretation of the directive.

The HLG fully supports existing initiatives at EU and national level to foster the use of existing

information sources and to promote the development of IT tools for more efficient

extraction, transmission and treatment of data.

The HLG calls upon all parties concerned to step up implementation of the only-once-

principle to the widest extent possible, to facilitate e-government solutions and promote

further burden reduction.

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Annex: Member State feedback on national implementation of ABRplus No. 2

Austria

The law transposing Directive 2006/46/EC (URG 200817) was adopted in the Austrian Parliament on

10 April 2008 and entered into force on 1 June 2008 (early transposition). A savings potential of the

measure of up to EUR 20 million per year for enterprises is expected, the benefit for SMEs is

considered to be significant.

Belgium

No information available

Bulgaria

Directive 2006/46/EC was transposed into national law on 5 September 2008. Bulgaria has not used

the possibility of increasing the thresholds for SMEs. Current legislation does not differentiate

between small, medium and large undertakings. In December 2006, a distinction was introduced in

the Bulgarian Accountancy Act between undertakings subject to simplified financial reporting

requirements and all other undertakings. The simplified financial reporting rules may be applied by

undertakings whose financial performance in the current or previous financial year did not exceed

two of the following thresholds:

Balance sheet value of assets as at 31 December: BGN 1.5 million (EUR 766,938);

Net annual income from sales: BGN 2.5 million (EUR 1,278,230);

Average number of employees during the year: 50

Croatia

No information available

Cyprus

The Cypriot Company Law18 provides that all companies, except small size companies as defined in

the law are obliged to have their accounts audited by a statutory auditor. As stipulated, however, in

the Assessment and Collection of Taxes Law, every person deriving income from the sources

17

Links: http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2008_I_70/BGBLA_2008_I_70.pdf, http://www.parlament.gv.at/PAKT/VHG/XXIII/I/I_00467/fname_102170.pdf 18

Article 152A of the Company Law, Cap 113 as amended thereon

http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2008_I_70/BGBLA_2008_I_70.pdfhttp://www.parlament.gv.at/PAKT/VHG/XXIII/I/I_00467/fname_102170.pdf

12

specified in the Law, shall for each year of assessment maintain books and records on the basis of

which accounts are prepared in accordance with acceptable accounting standards, which are audited

according to acceptable auditing standards by a person who has a licence to act as auditor of a

company according to the Companies Law. There is no intent, in the near future, to change any of

the above requirements. Within the context of reducing unnecessary administrative burden for small

businesses, the competent authority responsible for the implementation of SBA, is committed to

promote the necessary measures and procedures to transpose Directive 2013/34/EU into national

law. Consistent with the provisions of the Directive, this effort is expected to be completed by the

deadline already set by the Directive.

Implementation was done through the Companies Law legislation (CAP 113), according to which

Small companies file their financial statements which are usually prepared by a non-statutory

auditor. The stakeholders were informed and are informed by the Department of the Registrar of

Companies of the significance of Article 152A for small companies through Public Consultations.

The competent authority for the implementation of SBA intends to interact with all stakeholders, the

involvement and contribution of which will determine the successful implementation of Directive

2013/34/EU. The Assessment and Collection of Taxes Law, states that every person deriving income

from the sources specified in the Law, shall for each year of assessment maintain books and records

on the basis of which accounts are prepared in accordance with acceptable accounting standards,

which are audited according to acceptable auditing standards by a person who has a licence to act as

auditor of a company according to the Companies Law. On the other hand, Company Law (Article

152A), Cap 113, states that all companies, except small size companies (defined in the Law), are

obliged to have their accounts audited by a statutory auditor.

Czech Republic

Transposed by the amendment to the Act No. 563/1991 Coll., on Accounting and the implementing

measures to this Act, i.e. the Amendment to Act No 513/1991 Coll., The Commercial Code and

Amendment to the Act No 256/2004 Coll., on the Capital Market. The transposition deadline was

met. Directive 2006/46/EC introduced a new obligation for disclosure. The Czech Republic took

advantage of the Directives exemptions that allow the non- application of the information duties for

non-listed companies. Due to the fact that even before the adoption of this Directive these

obligations have not been applied for non-listed entities in the Czech Republic, the transposition of

this Directive did not cause actually any new reduction of the administrative burdens for these

entities. The aim of the Directive in this area has been therefore achieved. Respectively it

corresponded to the previous state of play. On the contrary, there has been some slight increase in

the administrative burden for listed companies those which are mandatory under the terms of the

Directive. Due to the structure of enterprises in the Czech Republic, the opportunity to change the

amount of total assets and net sales for the definition of the various categories of enterprises has not

been used. The threshold for the definition of these categories of enterprises in the Czech Republic

has not been changed since 2004.

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Denmark

Directive 2006/46/EC was transposed into Danish legislation19 on 17 June 2008, entering into force

on 1 September 2008. The undertakings were allowed to apply most of the changed provisions for

financial years beginning before 1 September 2008, though. The implementation process was

initiated in autumn 2007. By end of December 2007, a draft bill was submitted to a consultation.

During this consultation, there were different opinions amongst stakeholders as to the increase of

thresholds contained therein. While business associations supported the increase because of the

resulting reduced administrative burdens on SMEs, audit federations and financial institutions did

not support this as they believed this change would result in annual reports with only very little

information. There were also different opinions amongst stakeholders with regard to the abolition of

the requirement to audit the management report. Business federations and audit federations were

in general positive towards this abolition, but assumed that this amendment would result in only a

small reduction of administrative burdens. During the political process two changes were proposed,

one being a mere consistency correction, the other a precision on the disclosure requirements with

regard to applied methods for measuring investment assets and biological assets. According to a

survey produced in June 2010 measuring the extent of realised reductions stemming from the

implementation of Directive 2006/46/EC, the administrative burden is reduced by a total of approx.

EUR 8 million per year.

Estonia

Estonia did not want to implement the options contained in the Directive. The requirements on how

to prepare and present annual reports are across the board, and do not take into account the size of

the enterprise. The measures to reduce administrative burden in Estonia have been different,

particularly because of the launching of the e-reporting environment in the Central Commercial

Register portal20. From 1 January 2010 onwards, according to the changes to the Commercial Code

and Accounting Act in force from that date, all companies, foundations and non-profit organisations

are obliged to submit their annual reports via the e-reporting environment of the Central Commercial

Register (XBRL-based reporting system). By establishing the e-reporting environment, the burdens

for both the preparation and the administrative handling of the reports were reduced. Furthermore

the number of errors in the reports, and transparency and comparability of the financial statements

were increased. The data submitted through the e-reporting environment is machine processible.

According to a survey by the Ministry of Finance in 2011, in the opinion of 60% of the

respondents/companies the administrative burdens have decreased. Time spent on the filling of the

reports decreased by 30%; the reduction in the costs concerning the manual handling of annual

reports by the state was more than 20% and over 80% of the accounting experts found that there

was improvement in the quality of the reports. In addition to the study cited:

19

Act on the change of Executive Order on the Danish Financial Statements Act, adopted 17 June 2008 (no. 516) 20

https://ariregister.rik.ee/index.py?sess=4259229326092643388429564458497677485796352119039016614392865871&lang=eng

https://ariregister.rik.ee/index.py?sess=4259229326092643388429564458497677485796352119039016614392865871&lang=enghttps://ariregister.rik.ee/index.py?sess=4259229326092643388429564458497677485796352119039016614392865871&lang=eng

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Estimated financial saving in presentation of the annual reports in 2010, compared 2008, was

approximately EUR 4.625 million;

Estimated financial saving of the statistics reports the private, by priming (pre-filling) the

reports, could be EUR 247,500 in 2011.

Finland

Directive 2006/46/EC was not transposed in Finland (no reason specified).

Germany

Germany used the option to increase thresholds for small and medium-sized companies to the

maximum permitted by Directive 2006/46/EC21, applicable for financial statements for business years

ending after 31 December 2007. The total savings potential in Germany resulting from the

transposition of the Directive 2006/46/EC has been estimated at EUR 300 million. Savings were

driven by options made available to SMEs: (1) not having to engage a statutory auditor; (2) not

having to prepare a management report During the legislative drafting process various stakeholders,

including representatives of SME companies, had an opportunity to comment on the draft legislation.

Greece

Greece has partially implemented the measure. Directive 2006/46/EC of the European Parliament

and of the Council of 14 June 2006 was transposed into national law on 6 September 2010. Greece

has not used the possibility of increasing the thresholds for small and medium-sized enterprises

(SME). Current thresholds are: 2,5 million euros total balance sheet, 5 million euros net turnover, 50

employees. The vast majority of Greek companies do not exceed these thresholds.

Implementation under law 4250/2014: The requirement for all businesses to publicize their annual

accounts and of the decisions of the general meeting or/and the board of directors etc. to the

national government gazette (FEK) will be terminated by 31/12/2014. Filling the relevant documents

and information to the General Commercial Registry (GEMI) remains. From 20/7/2014 up to

31/12/2014 the undertakings will pay no charges at all for publications to the national government

gazette. This measure together with the abolition, under the same law above, of the obligation for

the undertakings to submit original documents to the public authorities will reduce dramatically the

administrative costs for all companies. However there are no estimates about the amount of these

savings for the companies.

21

Bilanzrechtsmodernisierungsgesetz (BilMoG) of 25 May 2009, Bundesgesetzblatt: BGBl. I 2009, S. 1102. Further information about the German transposition may be found in parliamentary document 16/10067 of the German Parliament (Deutscher Bundestag).

15

Extensive consultation, exchanges of views among stakeholders in the private and public sector,

meetings between the relevant OECD officers and the competent Greek authorities have taken place.

All of these facts were taken into consideration before implementing the measures. There are as yet

no national implementation measures that go further than the measures agreed at European level

Under law 3419/2005 for the General Commercial Registry, to be amended and updated, all

companies will be able to submit their documents to the registry only in electronic form and to pay

electronically all the relevant fees. This measure together with the abolition of the obligation to

publish in the national gazette and the obligation to submit original documents to the public

authorities, meet the criteria of best practice in our view, but there is no evaluation yet in this

matter.

Main aspects of the burden reduction proposals in Greece are:

Abolition of the publication in the Gazette (FEK): When the obligation for the publication in

the Government Gazette (FEK) of the annual accounts and of the decisions of the general

meeting or/and the board of directors is terminated/abolished, then the actual cost of the

undertakings will be reduced substantially. Relevant legislation has been proposed and a

positive response is expected. Estimated cost reduction: EUR 50 million.

Revision of the Greek Company Law: A working group has been set up to study the limitation

of supervision of the companies by regional authorities and the central administration and

also of the documentation required in order to obtain several licensing etc.. The aim is to

increase the financial thresholds after which the firms will be subject to control and audit by

the competent authorities and the audit companies. This will reduce the cost of bureaucracy

and audit for the companies and also the submission and processing of entries in the general

commercial registry will not be delayed.

Administrative burden will be reduced also when the possibility to submit documents only in

electronic form is given to the enterprises. This requires the implementation of the e-

signature which will be given to all companies and premises the full digitization of the

services of the public sector. There is no deadline for the accomplishment of this project.

The total amount of reductions cannot be estimated today because of the negative financial

circumstances.

Hungary

Hungary felt that the typical sizes of Hungarian enterprises do not justify allowing even more SMEs to

benefit from simplified reporting rules by setting higher value limits. Due to the characteristics of the

local enterprise structure, Hungary takes advantage of the opportunity of simplification only in

relation to small-sized enterprises. With regard to the fact that in Hungary the value limit applicable

to small-sized enterprises did not even reach the lower limit set in Directive 78/660/EEC and

considering the typical sizes of local enterprises, Hungary did not wish to further increase this limit

after 2006, the coming into force of Directive 2006/46/EC did not require separate transposition.

16

Currently in Hungary, the possibility of preparing a simplified annual account applies if in two

consecutive years, two of the following three indicators do not exceed the following limits:

the balance sheet total does not exceed 500 million forints (appr. EUR 1,640,000),

the annual turnover does not exceed 1,000 million forints (appr. EUR 3,280,000), and/or

the average number of employees in the year under review does not exceed 50 persons22.

The first two indicators do not reach the upper limit (EUR 4,400,000; EUR 8,800,000) set by Directive

2006/46/EC, which results from the fact that Hungarian enterprise sizes do not correspond to the

European average.

Ireland

Ireland has partially implemented the measure and implemented the options in the Directive as

regards simplified accounting and auditing rules for small companies. Ireland has not availed of the

option in the Directive to increase the thresholds for medium sized companies in relation to

simplified accounting rules. This Directive was implemented into national legislation by Statutory

Instruments No. 304 of 2012 for the purpose of availing of accounting exemptions for small

companies and Statutory Instrument No. 308 of 2012 which increased the balance sheet and

turnover thresholds for the purpose of availing of audit exemption. In Ireland, a savings potential of

appr. EUR 3 million was estimated. These potential savings are on foot of national legislation in 2012

that increased the audit exemption limits to the maximum provided by the Directive. The balance

sheet total was increased from EUR 3.65 million to EUR 4.4 million and net turnover was increased

from EUR 7.3 million to EUR 8.8 million. The further increase in the audit exemption threshold

benefits additional small companies who no longer have to expend money and time on the

engagement of auditors. Statistical data indicates that an additional 1250 companies approx. became

eligible to take advantage of audit exemption when the thresholds were raised to the maximum. For

prudential reasons relating to shareholder protection Ireland does not exempt small public

companies or small companies that are part of a group from the requirement for an audit. In addition

small private companies must meet all three size criteria in Article 11 of Directive before being

eligible for an audit exemption. As explained in Section D below, the Irish authorities propose to

modify this requirement.

Italy

When transposing both Directive 78/660/EEC and Directive 2006/46/EC, Italy took only limited

advantage of the simplification opportunities:

Possibility for Member States to grant exemption from the obligation to draw up and publish

the management report: The transposing act for Directive 78/660/EEC did not contain this

exemption. According to the transposing act for Directive 2006/46/EC, the directors of

22

Section 9(2) of Hungarian Act C of 2000 on Accounting

17

companies which draw up abridged financial statements are exempted from the obligation

to draw up the management report on condition that the notes to the financial statements

contain certain details on own shares.

Possibility to exempt small undertakings from the obligation to publish their profit and loss

account, annual report and audit report (Directive 78/660/EEC): No transposition

Possibility to permit small undertakings to draw up abridged balance sheets (Directive

78/660/EEC): The implementing law23 permitted abridged financial statements to be

published by those companies which in their first financial year, or subsequently in two

consecutive financial years, did not exceed two of the above limits: a) balance sheet total of

not more than ITL 2,000 million; b) net turnover of not more than ITL 4,000 million; c)

average number of employees during the financial year of not more than 50. When

implementing Directive 2006/46/EC, the quantitative benchmarks laid down in the Civil Code

rules for granting the exemption were updated24.

Possibility to permit medium sized companies to publish their balance sheet in abridged form

(Directive 78/660/EEC): No transposition, the quantitative benchmarks set out in the Civil

Code coincide with those for small undertakings.

Directive 2006/46/EC updated the quantitative benchmarks established by EU rules for

granting the exemption: Italy has not taken up for accounting purposes the notion of

medium sized companies set out in the EU rules in order to avoid excessive segmentation of

economic-financial disclosure requirements for Italian businesses and to reflect more closely

the makeup of the national business system.

Possibility to exempt SMEs from the obligation to have their annual accounts audited and an

audit report drafted (Directive 78/660/EEC): No transposition

In the activities of simplification and burden reduction the main associations are regularly consulted:

Italian Confindustria and Enterprise Network (CNA, Confartigianato, Casartigiani, Confcommercio,

Confesercenti). The Italian authorities and industry associations are unable to provide quantitative

data about reductions of administrative burdens or to confirm estimated savings. No gold plating was

identified.

Latvia

Directive 2006/46/EC was implemented in Latvia by amending the law on Annual Accounts25,

determining that the company is obliged to provide information on transactions with related parties,

the size of such transactions, the nature of existing relations and also other information on these

transactions which is needed to understand the financial situation of the company, if the transactions

are important and have not been concluded basing upon the usual market rules, and also the

23

Legislative Decree No 127/1991 24

Legislative Decree No 173/2008 25

Link: The Law on Annual Accounts: http://likumi.lv/doc.php?id=66461

http://likumi.lv/doc.php?id=66461

18

procedure for summarizing the required information was determined by the amendments. The Law

on Annual Accounts was supplemented with inter alia the requirement transposed from the Directive

to permit the valuation of financial instruments in accordance with international accounting

standards. No information is available on the resulting saving potential.

The Directive 2006/46/EC was transposed into national legislation at the end of 2006. The provisions

in relation to information disclosure of off-balance sheet arrangements and transactions with related

parties were entered into force on 1 January 2008. However there is no application of the maximum

thresholds defining small companies laid down in the Directive 2006/46/EC. There was no increase of

the thresholds defining medium-sized companies. Taking into account that Latvia used the option to

reduce information obligations for small companies in terms of reporting off-balance sheet

arrangements and transactions with related parties there were no consultations with stakeholders

about these provisions. There were consultations with stakeholders about increasing the thresholds

for small companies. The thresholds defining small companies were raised by 250% and small

companies are not subject to mandatory audit. The audit cost savings for companies is estimated at

approx. EUR 16.8 million over a 7 year period. Approx. 3 000 companies went from medium sized

to small and benefit from simplified accounting and exemption from a statutory audit. Small

undertakings will benefit from the simplification measures.

Lithuania

In Lithuania, there are only two categories of companies: Small companies and big companies. In

implementing Directive 2006/46/EC, the Law on Financial Statements of Entities was amended and

went into force in 2008, increasing the threshold of defining small companies. Consequently, roughly

about 19 percent of companies have gone into a lower category (from large to small), thus being able

to benefit from using simplified accounting requirements. However, no information is available on

the resulting savings potential. The draft laws were discussed with stakeholders and according to

their comments were adjusted. 19 per cent of companies who moved from higher category to lower

category of business size can use an option to draw up abridged balance sheet and profit (loss)

statement or to draw up full balance sheet and profit (loss) statement and not to draw up cash flow

statement.

Luxembourg

In Luxembourg, Directive 2006/46/CE was implemented through law of 10 December 2010. The

resulting increase of thresholds tends to help SMEs to reduce their administrative burdens (more

condensed information, no management report, no audit). However, the ensuing savings potential

cannot be measured with precision.

19

Malta

Malta transposed Directive 2006/46/EC through amendments to the Listing Rules which came into

force on 11 January 2010. The main change related to the publishing of the corporate governance

statement. Currently the Listing Rules already require issuers listed in Malta to include in their report

a statement of compliance providing an explanation of the extent to which they have adopted the

Code of Principles of Good Corporate Governance contained in the Listing Rules. There is no

quantification of savings potential available.

Relative provisions of the Directive had been already incorporated into the Maltese Companies Act

[Chapter 386 of the Laws of Malta]. As such, since the amendments introduced by Directive

2006/46/EC already formed part of Maltese Law, no further consultative process was deemed

necessary. Amendments to the Listing and Banking Rules as well as the enactment of LN 253 of 2008

were also deemed to be in accordance with the provisions of the Companies Act and as such, no

further consultation was considered necessary

No particular difficulties were experienced since listed companies already had the obligation to

publish their corporate governance statements. The amendments to the Listing Rules included a

comply and explain approach whereby listed companies are now required to divide the statement

in two parts the first part dealing with companys adherence to the main principles while the

second part deals specifically with non-compliance with any of the codes provisions. Institutions are

required to submit five year summary figures as well [BR/07/2014.01.

Thresholds for abridged accounts are less stringent than those envisaged by the Directive. These are

companies which on their balance sheet dates do not exceed the limits of two of the three following

criteria:

balance sheet total: two million and five hundred and sixty-two thousand and three

hundred and ten euro and seventy-four cents (2,562,310.74);

turnover: five million and one hundred and twenty four thousand and six hundred

and twenty-one euro and forty-eight cents (5,124,621.48);

average number of employees during the accounting period: fifty

Small Companies as defined in the Companies Act Article 185 (1) may, for all purposes of this Act,

draw up abridged balance sheets and abridged layouts of profit and loss account . for submission

to the Registry of Companies (ROC). However, it appears that most small companies still prepare

full accounts for other purposes and therefore submit the full version to the ROC.

During 2010, the Listing Authority in consultation with practitioners identified the need for a

comprehensive review of the Listing Rules with the aim of simplifying and updating the Rules so that

they can be understood and applied more easily by practitioners and entities operating in the

Maltese capital market. In fact Listing Rules mentioned in Section A above have been re-numbered as

5. Listing Rules were re- numbered as principles were divided into main principles, supporting

principles and code provisions. When preparing the corporate governance statement, listed

companies are now required to divide such statement in two parts the first part dealing with

20

companys adherence to the main principles whilst the second part would deal specifically with non-

compliance with any of the code provisions. (Reference is made to Circular to all Company

Secretaries of Listed Companies and Stockbroking Firms dated 16th November 2010 Revision to the

Listing Rules document attached).

Portugal

The Informao Empresarial Simplificada (Simplified Corporate Information, SCI) system was

established by Decree-Law No. 8/2007 enacted 17 January, to enable companies to submit

compulsory accounting, fiscal and statistical declarations electronically26. Up until the SCI, companies

have been obliged to provide the same information about their annual accounts to four separate

agencies (commercial registries, the Fiscal Administration, INE and the Bank of Portugal) and by four

different procedures:

Filing and registering annual accounts in paper format at a commercial registry office

(Ministry of Justice);

Submitting an annual accounting and fiscal declaration to the Ministry of Finance

(Directorate-General for Taxes);

Submitting annual accounting information to the National Statistical Institute (INE)

for statistical purposes;

Submitting information relating to annual accounting data to the Bank of Portugal for

statistical ends.

With the creation of SCI, all information relating to annual accounts can now be submitted in a single

process and at once with a single public entity in charge of forwarding the data to the other, avoiding

trips and eliminating the delivery of paper documents. It combines, in a single act, the delivery of the

annual accounting and tax information, the provision of accounts registry, the provision of statistical

information and provision of annual accounting data for statistical purposes, to the Bank of Portugal

and is conducted by online standard forms through the Portal of Finance27. Through the Portal of the

Company28, entities can track the status of the Register of Accountability. It is a cutting red tape

measure which has brought about the following benefits:

Greater simplicity for companies - Four obligations can now be taken care of through the

submission of a single form. Documents no longer need to be presented in person or in

paper format;

Lower costs for companies - With SCI, the cost of registering accounts is cheaper;

A more competitive and transparent economy - More information on Portuguese companies

can be made available, thereby increasing transparency in the Portuguese market;

26

www.ies.gov.pt 27

www.portaldasfinancas.gov.pt 28

www.portaldaempresa.pt

http://www.ies.gov.pt/http://www.portaldasfinancas.gov.pt/

21

Statistical information on Portuguese companies - Provides a more reliable and complete

perspective of the development of the Portuguese economy. The compilation of company

data in digital format means it can be handled automatically and used for statistical ends and

for assessing the health of companies by sector, size, geographical location, and otherwise.

This statistical information is available cost free, in Portuguese and English, at the Statistical

Corporate Information Portal29.

The SCI is conducted by online standard forms through the Portal of Finance

(www.portaldasfinancas.gov.pt). Once confirmation is given, the document is ready to be submitted.

At this time, it immediately generates an ATM reference. The payment of the registration act can be

made through the ATM or home banking. Companies have five days to make the payment of 80.

This settlement relates only to the provision of deposit accounts, paid single act of encompassing the

SCI. The amount payable is far lower, since its value was, from June 30, 2006, equal to 100. After

registration of accountability, the access code will be provided free for the Permanent Certificate of

Registration (the usual fee amounts to 25). This certificate makes available in electronic and

continuously updated support playback all business records of the company concerned. The access

code for Permanent Certificate eliminates the paper certificate that can be used in all interactions

with public or private entities, instead of the traditional document. The certificate is available from

the moment the payment is made and is processed at the relevant Register at the Commercial

Registry level. Through the Portal of the Company (www.portaldaempresa.pt), entities can track the

status of your Register of Accountability.

Companies save on travel costs and on having to create documents in different formats for four

separate government agencies. Previously, this register was made of paper, resulting in higher costs

to the Public Administration and companies, long waiting times and very high cost (16 , 2.5 per

page). Through the Portal of the Company (www.portaldaempresa.gov.pt), entities can track the

status of the Register of Accountability.

Slovakia30

Directive 2006/46/EC was transposed into Slovakian national law31; however, as the Directive does

not oblige Member States to use the increased thresholds/maximum limits, taking into account the

size of the Slovak economy and the economic operators in the market the threshold criteria for

defining small and medium-sized enterprises are imposed in Slovakia without recourse to the

maximum values. Voluntary transposition of Directive 2006/46/EC in relation to small and medium-

sized enterprises has not been applied either because Slovakia has treated the disclosure of data

from the financial statements in an equal manner for all entities. As there is no application of the

maximum limits laid down in the Directive, there is no savings potential to be realised.

29

www.estatisticasempresariais.mj.pt 30

http://ec.europa.eu/internal_market/auditing/docs/dir/transpo/sk02.pdf 31

In particular into Act No. 198/2007 Coll. and the MF decree No. 4455/2003-92, as amended

22

Slovenia

The implementation of Directive 2006/46/EC32 establishes less burdensome accounting/auditing

rules for small and medium sized enterprises and the savings potential in Slovenia is assessed at

being around EUR 126,000 per year (SCM). The support of EU expert group was helpful. Stakeholders

were consulted and the new rules were supported by stakeholders. Small companies are exempted

from the requirements for mandatory submission of corporate governance statement in the annual

report. They are also exempted from additional obligations from article 43(1). Small companies are

defined on the basis of maximum number of employees, net turnover and balance sheet total in

Directive 78/660/EEC. These thresholds were increased and therefore the proportion of small

companies also increased. There are no measures that go further than those agreed at EU level

Spain

Directive 2006/46/EC was implemented by Law No. 16/2007 of 4 July 200733. The threshold for the

preparation of abridged annual accounts was raised by 20 % and therefore SMEs that prepare

abridged accounts are not subject to mandatory audit. There is no information on the potential

savings available.

Sweden

The Directive was implemented on 1 March 2009 through government bill 2008/09:71 and on 1

November 2010 through government bill 2009/10:204. There is no detailed information available on

the savings potential. However, the combined net effect of introducing the corporate governance

statement, requiring a presentation of off-balance-sheet arrangements and transactions with related

parties most likely offsets the savings potential of the remaining proposals. A white paper was sent

out for public consultation in January 2008 and a second paper was sent out in June 2008. A public

hearing was held in June 2008. The combined net effect of introducing the corporate governance

statement, requiring a presentation of off-balance-sheet arrangements and transactions with related

parties most likely offsets the savings potential of the remaining proposals.

32

The Acts implementing Directive 2006/46/EC were Act Amending the Companies Act, Ur.l. RS, t. 68/2008, adopted on 8 July 2008, entered into force on 23 July 2008 and Act Amending the Investment Funds and Management Companies Act, Ur.l. RS, t. 92/07. 33

Law No. 16/2007 of 4 July 2007 on the reform and adaptation of business legislation relative to accounting among other things modified the Code of Commerce, the provisions of the Spanish Public Limited Companies Act approved by Royal Legislative Decree No. 1564/1989 of 22 December 1989, Law No. 2/1995 of 23 March 1995 on Limited Liability Companies, Law No. 27/1999 of 16 July 1999 on Co-operatives.

23

United Kingdom34

In March 2007, the UK Government consulted on the implementation of Directive 2006/46/EC35. This

involved the publication of a consultation document available to the general public and targeted

engagement with key stakeholder groups e.g. professional bodies and membership groups. Issues

raised included the need to balance the needs of users of accounts with the regulatory burdens on

business; recognition that users of the accounts of small businesses are likely to be small businesses

themselves; users need for reliable and accurate information; and the need to educate users in the

interpretation of financial statements. Directive 2006/46/EC was implemented by increasing the

thresholds used to define a small company. According to this law, the requirements are met by a

company in a year in which it satisfies two or more of the following requirements:

1. Turnover: Not more than 6.5 million [Previously 5.6m]

2. Balance sheet total: Not more than 3.26 million [Previously 2.8m]

3. Number of employees: Not more than 5036.

Maximum thresholds were implemented to allow the greatest number of companies to benefit from

reductions in the administrative burdens associated with the preparation and publication of annual

financial statements and their statutory audit. The changes were implemented with effect from 6

April 2008 for financial years beginning on or after that date. The impact assessment estimated that

as a result of the increases to the thresholds, 3100 medium-sized companies would become small

companies, and that 1,600 large companies would become medium-sized companies, so becoming

eligible to prepare and file less detailed accounts. Until 2012, the UK did not apply fully the

flexibilities offered by the option Directive 78/660/EEC to relieve small companies from the

obligation to have an audit. The following savings potential in the UK was estimated:

Annual average benefit: GBP 36.73 million,

Value of this benefit: GBP 305.47 million over a 10 year period,

Assuming that the reduced reporting requirements lead to a saving of only 6 hours of

accountancy time per year, using an hourly rate of GBP 26.00 the savings per company would

be around GBP 156 per annum,

An estimated 1,100 medium-sized companies and 6,100 small companies would become

eligible to not to have their accounts audited. The median audit fee for small companies at

that time was GBP 5,000 per year. This implied savings would be in the region of GBP 36.0

million per annum if all eligible companies took up the exemption.

34

Links: Implementation of Directive 2006/46/EC on Company Reporting Amending the Accounting Directives A Consultative Document: http://www.dti.gov.uk/files/file38063.pdf; UK definition of a small company - s382 of the Companies Act 2006: http://www.legislation.gov.uk/ukpga/2006/46/section/382; The Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008: http://www.legislation.gov.uk/uksi/2008/393/contents/made 35

http://www.dti.gov.uk/files/file38063.pdf (Section 3, pages 11-15 are relevant to proposals to raise the thresholds). 36

The Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008 (2008/393), Section 382

http://www.dti.gov.uk/files/file38063.pdfhttp://www.legislation.gov.uk/ukpga/2006/46/section/382http://www.legislation.gov.uk/uksi/2008/393/contents/madehttp://www.dti.gov.uk/files/file38063.pdf

24

The small companies' regime is optional and some eligible companies voluntarily continue to provide

full accounts; similarly, a number of small companies continue to have their accounts audited,

although not required to do so. Those companies would do so because of the commercial value to

their enterprises and not as a result of legislative requirements.

It was estimated that a further 3,100 medium-sized companies and 1,600 large companies would be

eligible to prepare and file less detailed accounts at Companies House. If the reduced reporting

requirements would lead to a saving of only 6 hours of accountancy time per year, using an hourly

rate of 26.00 the savings per company would be in the region of 156 per annum. This results in a

reduced burden for all 4,700 qualifying companies amounting to a total saving of up to 730k per

annum. Further, if the thresholds used to define small companies were used to determine eligibility

for exemption from the requirement to have a statutory audit, it was estimated that 1,100 medium-

sized companies and approximately 6,100 small companies would become eligible to take up the

option not to have their accounts audited. The median audit fee for small companies was 5,000 per

year. If all eligible companies were to take up the exemption total estimated savings would be in the

region of 36.0 million per annum. Taken together the annual average benefit = 36.73m. The

present value of this benefit was calculated at 305.47m over a 10 year period. The UK subsequently

amended its legislation to allow companies to take advantage of the audit exemption when two out

of three criteria (thresholds on the number of employees/balance sheet total/annual turnover) were

met rather than requiring companies to meet all three criteria as was the original position.